The money spent on statins, proton pump inhibitors (PPIs) and hypertensive treatments in particular is 'significantly out of line with patient benefits,' it says.

The report claims some drugs prescribed in large volumes are up to 10 times more expensive than substitute treatments that deliver similar benefits.

Pointing the finger at GP prescribing habits, it says that GPs often do not understand the cost implications of what they prescribe. It cites the results of a survey of 1,000 GPs that showed 'GPs' ability to rank branded drugs in order of price proved no better than chance'.

'The results suggest that GPs may have a systematic perception that off-patent brands have the lowest prices of all brands in a therapeutic group,' it says.

'But in fact off-patent brands often do not significantly fall in price in this way.'

It continues: 'We found that the GMS contract is likely to exert the strongest financial influence on GPs' prescribing behaviour. While the contract offers many and varied financial rewards to GPs who meet certain clinical standards it provides limited incentives for cost containment. Its net effect is therefore likely to dull GP price sensitivity.'

GPC negotiator Dr Peter Holden did not think that it was necessary to incentivise GPs through the contract because 'most GPs are doing it already'.

'I think the OFT is not aware of just how aware GPs are,' he said. 'When GPs do a prescription the various prices come up on the computer screen - GPs are very aware of price.'